Food delivery giant Deliveroo today narrowed the price range for its forthcoming initial public offering, lowering the top end of its target valuation by £1 billion or about $1.38 billion.

The move follows a recent slide in tech stocks driven by increased U.S. Treasury yields. 

London-based Deliveroo, incorporated as Roofoods Ltd., has about 6 million customers in a dozen markets worldwide. Those customers placed takeaway orders worth a total of £4.1 billion, or about $5.65 billion via its app, in 2020, a 64% jump from the prior year. Like other fast-growing gig economy apps, Deliveroo is not yet profitable: It lost £223.7 million in 2020. 

Deliveroo is scheduled to float on the London Stock Exchange this Wednesday. The company is hoping to raise £1 billion, or about $1.377 billion, and originally planned to do so by selling shares at £3.9 to £4.6 apiece. Today, Deliveroo lowered the top end of the target price range from £4.6 to £4.1. That means the company is now expecting a market capitalization of £7.6 billion to £7.8 billion, down from £7.6 billion to £8.8 billion before.

The company said in a statement that “given volatile global market conditions for IPOs, Deliveroo is choosing to price responsibly within the initial range and at an entry point that maximises long-term value for our new institutional and retail investors.” Tech stocks have retreated over recent weeks amid an increase in the 10-year yield on U.S. Treasury notes, a key borrowing benchmark that affects interest rates. Interest rates, in turn, influence the stock market performance of tech companies.

Deliveroo’s price target reduction also comes a few days after a number of major U.K. investors indicated they would not participate in its IPO. Aviva PLC and Aberdeen Standard, which have about £800 billion in combined assets under management, told CNBC they won’t join the offering partially because they’re concerned about Deliveroo’s employment practices. London-based M&G Investments reportedly expressed similar concerns.

One of the contributors to the investor caution could be a recent landmark ruling by the U.K.’s Supreme Court that found drivers who provide rides and deliver online orders via Uber Technologies Inc.’s apps should be reclassified from independent contractors to workers. The ruling is potentially significant for Deliveroo because the company classifies drivers as independent contractors.

Even amid the volatility in tech stocks and increased regulatory scrutiny of gig economy apps, Deliveroo said in its statement today that it has “received very significant demand from institutions across the globe.” The company added that the IPO is “covered multiple times throughout the range, led by three highly respected anchor investors.”

At the revised price target, Deliveroo’s forthcoming IPO on Wednesday is still expected to be the biggest London listing in years.

Photo: Deliveroo